2024 (11) TMI 1294 - AT - Income Tax

Assessment u/s 153A - Additions u/s 69B - assumptions and presumptions based on the loose sheet found at the time of search - HELD THAT - The unsubstantiated and uncorroborated seized material alone cannot be considered as conclusive evidence to frame these assessments. The words may be presumed in section 132(4) given an option to the AO concerned to presume these things, but it is rebuttable and it does not give a definite authority and conclusive evidence. The assessee is having every right to rebut the same. The entire case depends upon the rule of evidence. There is no conclusive presumption with regard to unsubstantiated seized material to come to the conclusion that assessee has unaccounted transactions. In the present case, the assessee categorically denied unaccounted transactions. The AO cannot draw inference on the basis of suspicion, conjectures and surmises. Suspicion, however strong, cannot take place the material in place of evidence brought on record. AO should act in a judicial manner, proceed in a judicial spirit and come to the judicial conclusions. AO is required to act fairly as a reasonable person, not arbitrarily and capriciously. The assessment u/s 153C should have been supported by adequate material and it should stand on its own leg. This notebook or loose sheets found during the course of search is only circumstantial evidence and not full proof evidence to sustain the addition. No addition can be made in the absence of any corroborative material. If it is circumstantial evidence in the form of loose sheets and notebook, it is not sufficient to come to the conclusion that there is conclusive evidence to hold that assessee has any unaccounted transactions. The notes in the diary/loose sheets are required to be supported by corroborative material. Since there was no examination or cross-examination of persons concerned, the entire addition in the hands of the assessee on the basis of uncorroborated writings in the loose papers found during the course of search cannot be sustained. The evidence on record is not sufficient to uphold the stand of AO that assessee has unaccounted transactions. There are various loose sheets, scribblings and jottings having no signature or authorization from the assessee's side. These are unsubstantiated documents and there is nothing to suggest any undisclosed assets of assessee found during the course of search. More so, it does not show any recovery of the undisclosed assets in the form of landed property, building, investments, money, bullion, jewellery or any kind of movable or immovable assets. The seized material relied by the assessing officer for sustaining addition is not speaking one in itself and also not speaking in conjunction with some other evidence which the authorities found during the course of search or post search investigation. Thus, the well settled legal position is that a non- speaking document without any corroborative material, evidence on record and finding that such document has not materialised into transactions giving rise to income of the assessee which had not been disclosed in the regular books of accounts of the assessee has to be disregarded for the purpose of assessment to be framed pursuant to search and seizure action. Addition is made by AO on arbitrary basis relying on the loose papers, containing scribbling, rough and vague noting's in the absence of any corroborative material and this material cannot be considered as transactions carried on by assessee giving rise to income which are not disclosed in the regular books of accounts by assessee. Admissibility of statements recorded u/s 132(4) as evidence - Admission made by the assessee will constitute a relevant piece of evidence but if the assessee contends that in making the admission, he had proceeded on a mistaken understanding or on misconception of facts or untrue facts, such admission cannot be relied upon without considering the aforesaid contention. In our opinion, the voluntary admission are not conclusive proof of the facts admitted and may be explained or shown to be wrong but they do raise an estoppel and shift the burden of proof to the person making the admission. It is to be noted that, unless shown or explained to be wrong, they are an efficacious proof of the facts admitted. Thus, the burden to prove admission as incorrect is on the maker and in case of failure of the maker to prove that the earlier stated facts were wrong, these earlier statements are suffice to conclude the matter. If retraction or proved sufficiently, the earlier stated facts lose their effect and relevance as binding evidence and the authorities cannot conclude the matter on the basis of the earlier statements alone. However, bald retraction of earlier admission will not be enough after retraction. Such statements cannot automatically become nullified. If the assessee proves that the statement recorded was involuntary and it was made under coercion, the statement has no legal validity. Thus, the above additions cannot be made solely based on the statements recorded u/s 132(4). See Commissioner of Income-tax v. Harjeev Aggarwal 2016 (3) TMI 329 - DELHI HIGH COURT The onus lies on the Department to collect the evidence to corroborate the notings on the loose sheets. In the present case, it is undisputed position that as a result of search and seizure action in the case of respondent- assessee and its group companies, no material whatsoever was seized and found indicating payment of on-money consideration at the time of purchase of the lands. A sworn statement cannot be relied upon for making any addition and must be corroborated by independent evidence for the purposes of making assessments. Balance addition contention of the ld. D.R. is that this is based on the statement recorded u/s 132(4) and also evidence inventorized as A/MI/4 page no.1 to 24 which has been seized at the premises of the assessee - It is an agreement for Joint Development Agreement and sharing of shops/apartments entered into on 26.11.2012 between Mr. K.L. Chayabba and Mr. Mohammed Ali in one part as owner of the land and Mr. Mohammed Ibrahim, the present assessee in his individual capacity as a developer of the property for constructing the residential cum commercial project Rose Garden with a super built up area of 39,816 sq.ft. at Deralakatte, Mangalore. As per this agreement, the assessee paid a sum of Rs. 10 lakhs refundable security deposit, out of which sum of Rs. 4 lakhs was by cash. This was admitted by the assessee in section 132(4) statement recorded on 31.8.2017 and also on 30.10.2017. Further, it was admitted by assessee in sworn statement recorded u/s 131 of the Act on 5.9.2017 but however, the assessee was not adhered to his statement while filing return of income. This addition is based on only unsubstantiated statement recorded u/s 132(4) of the Act and 131 of the Act without any supporting evidence as discussed in earlier paras. we are of the opinion that addition cannot be made on the basis of statement recorded u/s 132(4). Assessee appeal allowed. Addition u/s 69 of the Act placing reliance on the seized material at the residence of assessee, which is in the agreement for purchase of non-agricultural property - As per agreement, total consideration was Rs. 20 lakhs and the assessee has paid Rs. 5 lakhs on the date of agreement. The assessee has confirmed the payment vide statement u/s 132(4) of the Act and also statement recorded u/s 131 - HELD THAT - In this case, addition was based on the statement recorded u/s 132(4) 131 of the Act on various dates from assessee. There is no corroborative material to suggest that this is unaccounted payment made by the assessee in the assessment year under consideration. The assessee has been assessed to tax and offered the income in the assessment year under consideration on the basis of presumptive income declared u/s 44AD of the Act. The seized material relied by the AO i.e. A/MI/06 is not self-sufficient to sustain the addition. More so, the revenue authorities have not examined the parties concerned who has received the payment to prove conclusively that there was an actual payment made by assessee, which was undisclosed by the assessee in his books of accounts. The evidence brought on record by the department is not enough to fasten additional tax liability on the assessee. The department without examining Mrs. Gulzara Banu had came to a conclusion that there was unaccounted payment made by assesse by way of cash to her. In our opinion, this addition is based only on conjectures and surmises and not based on corroborative material. As such, we are not in a position to sustain the addition. Further, the ld. AO has failed to establish live link between the seized material and the statement of recipient who has received this payment. There is no conclusive presumption to say that actual payment has been passed to Mr. Gulzara Banu unless he has confirmed this payment and there after given a cross examination to the present assessee so as to make addition. Hence, we delete the additions. Addition made on the basis of 26QB Challan, wherein it was showing the TDS made on the immovable property transaction u/s 194IA - This is the project by name Sita Plaza Developed Mr. Manohar B. Shetty, joint development agreement with Hindusthan Infrastructure Developers (HID) wherein the present assessee Mohammed Ibrahim is the Managing Partner of (HID). In our opinion, the transaction took place in the hands of firm in the name of Hindusthan Infrastructure Developers (HID) cannot be brought to tax in the hands of the present assessee who is only the managing partner of the said firm (HID) since the present assessee and that firm are two different taxable units and each one is distinguished and separate assessable unit for the purpose of Income Tax. Accordingly, this impugned amount cannot be taxed in the hands of present assessee in his individual capacity. Accordingly, the addition is deleted. Addition under the head income from other sources - There is a sale agreement dated 17.9.2016 which shows the payment. However, the contention of the assessee is that the assessee has offered the profit arose from this transaction in subsequent assessment years as soon as the project is completed, which is required examination. Accordingly, the issue is remitted to the file of ld. AO for fresh consideration to verify whether this income is subject to tax in any subsequent assessment year. Addition towards bogus loan based on the seized material marked - This addition has been made only on the basis of statement recorded u/s 132(4) of the Act which is unsubstantiated document without verifying the concerned persons involved therein i.e. Mr. Abdul Saleem GH. The addition based only on the basis of sworn statement recorded u/s 132(4) of the Act cannot be based for addition without any corroborative material as discussed in earlier para of this order. This addition is deleted. Addition u/s 69 - assessee has deposited to various bank accounts during demonetization period - As it was submitted that assessee had sufficient withdrawals from various bank accounts and past savings which arise out of agricultural income. Hence, the addition cannot be made. The order of the ld. AO is ex-parte. Before ld. CIT(A), assessee has not placed necessary evidence to explain the source of deposits whether it is from agricultural activities or from earlier savings/past withdrawals. It is the duty of the assessee to explain the source for deposit of said amount of Rs. 63.27 lakhs during the course of demonetization. Accordingly, we remit this issue to the file of ld. AO to examine the same.

Summary

Issues Involved:

1. Legality of additions made under Section 69B based on assumptions and presumptions from loose sheets found during a search.
2. Justification for additions under Section 153A without corroborative evidence.
3. Consideration of relevant judicial precedents and their applicability to the case.
4. Assessment of additions made under Section 144 and the legality of ex-parte orders.
5. Evaluation of unsubstantiated statements under Section 132(4) as a basis for additions.
6. Examination of the validity of assessments based on unsigned agreements and uncorroborated documents.
7. Determination of the evidentiary value of loose sheets and statements in tax assessments.

Detailed Analysis:

1. Legality of Additions under Section 69B:
The Tribunal examined the legality of additions made under Section 69B, which were based on loose sheets found during a search. It was argued that these additions were made purely on assumptions and presumptions without any corroborative evidence. The Tribunal emphasized that for any addition under Section 69B, there must be corroborative and conclusive evidence to support it. The reliance on loose slips and uncorroborated notations was deemed insufficient to justify the additions.

2. Justification for Additions under Section 153A:
The Tribunal assessed the justification of additions made under Section 153A, highlighting that such additions cannot be made without corroborative evidence. The Tribunal noted that the original assessment had not abated as of the date of the search, and no valid seized material was found to support the reopening of assessments under Section 153A. The Tribunal reiterated that mere assumptions or presumptions based on loose sheets do not suffice for making additions under this section.

3. Consideration of Judicial Precedents:
The Tribunal considered several judicial precedents cited by the appellant, including CIT vs. Lancy Constructions, CIT vs. Kabul Chawla, and Canara Housing Development Co. vs. DCIT. It was argued that these decisions were squarely applicable to the appellant's case. The Tribunal emphasized the importance of adhering to established legal principles and precedents, particularly regarding the requirement of corroborative evidence for making additions.

4. Assessment under Section 144 and Ex-Parte Orders:
The Tribunal evaluated the legality of assessments made under Section 144, which were concluded ex-parte. It was argued that the assessment was not time-barred, and the additions were made based on assumptions and presumptions. The Tribunal stressed that assessments under Section 144 must be based on concrete evidence and not merely on unsubstantiated statements or loose sheets.

5. Unsubstantiated Statements under Section 132(4):
The Tribunal scrutinized the reliance on statements recorded under Section 132(4) as a basis for additions. It was argued that these statements, without corroborative evidence, could not form the sole basis for making additions. The Tribunal highlighted the need for independent evidence to substantiate the statements made during search operations, reinforcing that mere admissions without supporting evidence are insufficient for tax assessments.

6. Validity of Assessments Based on Unsigned Agreements:
The Tribunal examined the validity of assessments based on unsigned agreements and uncorroborated documents. It was argued that such documents, lacking signatures or corroborative material, could not be relied upon for making additions. The Tribunal underscored the necessity of verifying the authenticity and evidentiary value of documents before using them as a basis for tax assessments.

7. Evidentiary Value of Loose Sheets and Statements:
The Tribunal deliberated on the evidentiary value of loose sheets and statements in tax assessments. It was contended that these documents, being unsubstantiated and lacking corroborative evidence, could not be considered conclusive for making additions. The Tribunal reiterated that additions must be based on concrete evidence and not on mere assumptions or conjectures derived from loose sheets or uncorroborated statements.